#13623 - General Revision - Business Law and Practice

Business Law & Practice

General Revision

GM = General Meeting

BM = Board Meeting

MA = Model Articles

TA = Table A Regulations

Executive Director:

Job within the company, full time employee as well as director

Non-Executive Director:

Non full time director, works elsewhere

Alternate Director:

When a director is unable to attend a meeting so nominates someone to take his place

De facto director:

Act as a director but not formally appointed. Legally treated as if they were a director

Shadow Directors:

s251(1) CA 2006 If controlling a company but not a director you may be a shadow director

Duties:

1. Act within powers

2. Promote success of the company

3. Exercise independent judgment

4. Exercise reasonable care, skill and diligence

   • Comparison with that expected of other directors

   • Also person skill/knowledge of the director

5. Avoid conflicts of interest

   • Does NOT apply to a transaction with the company (s175(3))

   • Despite an conflict the directors can authorise matter if complied with s175(5) and (6) [private only]

6. Not accept benefits from third parties

7. Declare interest in transactions

Have regard to case law s170(4) and the remedies imposed (s178)

s174(2)(a) compare with other directors, s174(2)(b) personal knowledge and skill

Breach:

Foss v Harbottle (Derivative Claim by minority shareholder) s260-264 CA

s260(3) Case brought in own name

s260(5) Case brought in company name

Company being conducted in a way that is unfairly prejudicial s994 CA (outcome is buy shareholder out)

• Cannot amend articles to prevent liability but can insure against liability s232

• s239 Ratification (ordinary resolution)

• Director and connected person cannot vote s239(4)

• s180(4)(a) can give advance authorisation for a breach,

• s1157 Court may excuse director is acted ‘reasonably and honestly’

• s122(1)(g) Court order to wind up company (more in Insolvency)

Holding Companies

Holds another company, its subsidiary. Will have shares in those companies.

Advantages:

• Isolating business to reduce the risk of failure effecting others

• Focus and develop brand of each

• Isolate management

• Separate profit centres. Incentive to work hard

• Flexibility over acquisitions and disposals

• Maximum tax advantage

• Specific compliance requirements only for certain businesses not for all

Incorporation of a Company:

What is needed?:

1. Memorandum of Association s8 and s7(1), members are known as subscribers

2. Articles of Association

   1. Contract between members

   2. If no Articles, or no amended or excluded articles then Model Articles (s20)

3. Name

4. Statement that office is in England & Wales

5. Statement that limited by shares

6. Whether public or private

7. Name and address of agent (solicitor)

8. Statement of capital and initial shareholdings (s10(4)(a) and s16 (1), (5))

9. Address of registered office

10. First director(s) and company secretary (1 if private and no secretary, 2 if public and secretary) s16(1) and (6)

11. Statement that the Companies Act has bee complied with

12. Appropriate fee

Shelf Company:

• Incorporated but not trading

• Made by company formation agents

• Quick way of obtaining new company already incorporated

• First directors/members will be the formation agents

Service of Notices:

• When sent by company in the post deemed service is 48 hours after sending s1147(2)(a)

• When sent by company using electronic means deemed service is 48 hours after sending s1147(3)

• Don’t count hours on non-working days s1147(5)

Removal of Director:

Cooperative Board s303

Put request in post

2 days

Served (21 days to reply)

21 days

Wait and see if board reply as may send on the last day

2 days after

Board call GM within 28 days

18 days

Day of meeting

44 days

Uncooperative Board s305

Put request in post

2 days

Served (21 days to reply)

21 days

Wait and see if board reply as may send on the last day

2 days after

Members call GM (14 clear days)

14 days

Day of meeting

40 days

Employee rights again dismissal

Wrongful Dismissal

• Common Law Claim

• Based on contract terminated in a way which classifies as a breach

• i.e no notice, inadequate notice, ending a fixed term before its date

• If notice required and correctly given then no claim for wrongful dismissal whatever the reason for the termination

• Statutory minimum notice:

  • 1 week if more than a month

  • 2 weeks if more than 2 years

  • Thereafter 1 week per year to a max of 12 weeks

• No claim on resignation

• If employer commits a repudiatory breach of express/implied term then employee can treat contract as discharged

• Although not actually dismissed this is constructive dismissal.

  • Must leave within a reasonable time of breach or be seen to accept it

• Normal contractual damages

• Put the employee in the position as if the contract had not been broken (net salary)

• Duty to mitigate losses (find work)

• County, High Court or employment tribunal (but latter limited to 25k)

Unfair Dismissal

• s94 Employment Rights act 1996

• Employment Tribunal

• ‘Qualifying Employee’ (post 6/4/12 2 years continuous employment needed. Pre 6/4/12 only 1 year needed)

• Dismissed? Constructive or actual

• Principle reason for dismissal permitted?

  1. Capability or qualifications of employee (incompetence etc)

  2. Conduct of employee

  3. Redundancy

  4. Employee could not work without breaking law (driver with no licence)

  5. Other substantial justifying reason

• Reasonable in the circumstances?

Compensation:

• Basic Award: Looks at age, pay and length of service

• Compensatory Award: In addition to the above the tribunal may award an amount which it believes is just and equitable.

  • Max 76,574

  • Looks at: immediate loss of wages, future loss, loss of benefits and loss of statutory protection

  • Compliance with ACAS Code. If not and:

    • Employees failure, reduction by up to 25%

    • Employers failure, increase by up to 25%

Procedure:

1. Dismissed?

2. Qualify? (2 years)

3. Fair Reason (burden on employer)

4. Fair Process (burden on employer)

5. Conclusion

Other options:

Negotiate an agreement

Garden Leave (reduce work, have holiday, full pay, max. 6 months)

Redundancy

• Where the employer does not pay a redundancy payment or the employee wishes to dispute it he may apply to the employment tribunal

• Limitation period of 6 months

• ‘Qualifying employee’? (post 6/4/12 2 years continuous employment needed. Pre 6/4/12 only 1 year needed)

• Dismissed? Constructive or actual

• Do the circumstances = redundancy? s139 ERA 1996:

  • Complete closedown (ceasing business)

  • Partial closedown (cease business where employee works)

  • Over manning or change in the type of work

• No overlapping claim awards (can’t have 2 damages for 1 breach)

Directors and their Service Contracts:

• Terminating a service contract ending directorship. Become a non-executive director

• Terminating directorship automatically end service contract although it will effectively put the company in breach of it

Company Financing:

Debt Finance: Loan

Equity Finance: Shares

Gearing

Balance between debt and equity.

High Gearing: Low equity and high debt

Low Gearing: High equity and low debt

Statement of capital:

Total number of shares

Aggregate nominal value

Shares per class

Amount paid on...